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AAFM CWM_LEVEL_2 Exam - Topic 5 Question 90 Discussion

Section B (2 Mark)Ajay is considering to purchase a house which will bring rental income of Rs. 15,000/- p.m at the end of month. Ajay is looking for 12% returns and he is expecting to sell the property after 5 years for Rs. 6 lac. What price Ajay should pay for this property now?
B) Rs. 395000
A) Rs. 468000
C) Rs. 400000
D) Rs. 495000

AAFM CWM_LEVEL_2 Exam - Topic 5 Question 90 Discussion

Actual exam question for AAFM's CWM_LEVEL_2 exam
Question #: 90
Topic #: 5
[All CWM_LEVEL_2 Questions]

Section B (2 Mark)

Ajay is considering to purchase a house which will bring rental income of Rs. 15,000/- p.m at the end of month. Ajay is looking for 12% returns and he is expecting to sell the property after 5 years for Rs. 6 lac. What price Ajay should pay for this property now?

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Suggested Answer: B

by Mauricio at Sep 12, 2024, 11:50 PM

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Caitlin
8 months ago
Wait, can he really sell it for Rs. 6 lac after 5 years?
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Billye
8 months ago
I agree, Rs. 468,000 sounds about right.
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Teddy
8 months ago
12% returns? Seems a bit high for real estate.
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Desmond
9 months ago
I think he should pay around Rs. 400,000 for it.
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Alesia
9 months ago
The rental income is Rs. 15,000 p.m.
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Rhea
9 months ago
I think the key is to use the formula for present value correctly. I just hope I remember the right discounting method for both cash flows!
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Ronny
9 months ago
I feel like I might be overthinking this. Shouldn't we just add the present value of the rental income to the present value of the selling price?
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Reena
9 months ago
This seems similar to a practice question we did on investment returns. I think we need to discount the rental income and the future sale price separately.
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Vonda
10 months ago
I remember we calculated present value in class, but I'm not sure how to factor in both the rental income and the future sale price together.
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Chau
10 months ago
This seems tricky, but I think I can do it. I'll need to use the present value formula to calculate the value of the rental income stream, and then add the present value of the sale price. Hopefully I can get the right answer by working through it carefully.
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Chu
10 months ago
Okay, I think I've got this. I'll need to find the present value of the monthly rental income over 5 years, using a 12% discount rate. Then I'll add the present value of the expected sale price after 5 years. The total should give me the maximum price Ajay should pay.
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Laurel
10 months ago
This looks like a straightforward time value of money problem. I'll need to calculate the present value of the rental income and the expected sale price, then add them together to find the maximum price Ajay should pay.
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Penney
10 months ago
Hmm, I'm a bit unsure about how to approach this. I know it involves present value calculations, but I'm not sure if I should be using the 12% return rate or a different discount rate. Let me think this through step-by-step.
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Wilda
10 months ago
I think the intelligent proxy gets triggered mainly when a domain is block-listed, but I'm not entirely sure.
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Fallon
1 year ago
I can already smell the rental income from this property. I'm definitely going with A) Rs. 468,000 - it just makes the most sense to me.
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Aron
1 year ago
Haha, this is like finding the right price for a crystal ball! I think I'll go with B) Rs. 395,000 and hope for the best.
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Gail
1 year ago
I agree with you, B) Rs. 395,000 sounds like a good choice. Let's hope for the best!
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Alease
1 year ago
I'm leaning towards C) Rs. 400,000. It seems like a good balance.
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Casey
1 year ago
I think I'll go with A) Rs. 468,000. It seems like a reasonable price.
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Ardella
1 year ago
This is a tricky one. I'm not sure if I should be considering the future sale price or just focusing on the rental income. I'm going to go with D) Rs. 495,000, just to be safe.
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Maia
1 year ago
It's a tough decision, but I think it's better to be safe and go with D) Rs. 495,000.
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Rossana
1 year ago
I'm going with option D) Rs. 495,000 as well, just to be on the safe side.
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Maira
1 year ago
I'm not sure if the future sale price should have that much weight in the calculation. I would pick C) Rs. 400,000.
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Gilma
1 year ago
I agree, it's important to take into account both factors to make an informed decision.
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Argelia
1 year ago
I think we should consider both the rental income and the future sale price to calculate the price Ajay should pay for the property.
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Rosalia
1 year ago
I agree, it's important to take into account both factors. I would also choose A) Rs. 468,000.
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Glen
1 year ago
I think you should consider both the rental income and the future sale price. I would go with A) Rs. 468,000.
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Talia
1 year ago
Hmm, this seems like a standard time value of money problem. I'm leaning towards C) Rs. 400,000, but I'll need to double-check my calculations.
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Iluminada
1 year ago
I agree, C) Rs. 400,000 makes sense based on the information given.
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Kirk
1 year ago
I think the answer is C) Rs. 400,000 because that would give Ajay the 12% returns he is looking for.
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Flo
1 year ago
This question is all about the present value of future cash flows. I think the correct answer is A) Rs. 468,000.
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Madalyn
1 year ago
I agree with Marshall, A) Rs. 468000 makes sense because it takes into account the rental income and expected selling price.
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Casie
1 year ago
I disagree, I believe the answer is C) Rs. 400000.
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Marshall
1 year ago
I think the answer is A) Rs. 468000.
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